DAX Recovers from Yesterday’s Lows, Political Uncertainty Grows
The Green party said it would not back increased military spending proposed by the CDU party. Suggesting its own proposal for spending and delaying the formation of a government.
- Green party refuses to back €500 billion spending fund
- CDU wants to reform constitutional debt rules
- Volkswagen expects profit margin to remain flat
The DAX recovered from its lows yesterday and is up 0.88% on the day. Tariff woes are creating global investor concerns, which created a selloff in stock markets.
Investors are now watching the negotiations for the formation of a coalition government. With the hope that the new government will lift the debt ceiling and fund extra spending on infrastructure and defense.
Green Party Prolongs Formation of Government
The Green party’s refusal to agree on extra military and infrastructure spending means that a coalition government may take much longer than hoped.
The CDU party, which won the recent elections, is leading negotiations to form a coalition with the Greens and Socialist parties.
The SPU seem to be on board with the extra spending and raising the statutory lending limits. The Green party is pushing back on increasing defense spending and a €500 billion infrastructure fund.
The Greens are making their own proposal which includes heavy tax hikes, opposing the tax cuts sought by the CDU and SPU.
The environmentalist party also wants to define military spending in a broader manner to include foreign aid, IT, and intelligence capabilities.
DAX Live Chart
Volkswagen Sees Unchanged Profit Margin for 2025
The group expects its profit margin to remain at around 5.5-6.5% for 2025, as the company battles weak demand and extra costs.
The company’s profit margin in 2024 was 5.9%, however, this year’s forecast has not taken into account a possible tariff war with the US.
The group is exposed to the 25% tariffs on Mexico and Canada, countries which host several plants for the automaker.
The company is also struggling to create cheaper EV models to compete with rivals from Asia. The company is tackling the issue by implementing a deep cost-cutting drive.
Today’s announcement is reflective of the German auto industry as a whole. Each company in the sector facing similar problems to Volkswagen.
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